US February non-farm payrolls report - Analysts react

The drop in hourly earnings in today’s report is misleading, continuing a pattern of undershooting in months when the 15th – the payday for people paid semi-monthly - falls after the employment survey week. “Same thing in March, but then there'll be a huge rebound, putting wage growth y/y at new highs […] We don't expect payrolls to keep rising at anything like this pace, but the underlying momentum here is strong. […] That means you, Janet. The Fed should hike on the 16th, but in all probability, they won’t.” – Ian Shepherdson, chief economist, Pantheon Macroeconomics

Friday’s upbeat jobs report raises the possibility that the US central bank might opt to hike rates again when it meets in March. Nonetheless, current signs of higher inflationary pressures and a tighter jobs markets must be considered alongside signals that that economic growth may be slowing, “possibly sharply” amid growing concerns about the outlook. “The Fed will therefore be reassured that the labour market is still tightening, which in theory should feed through to higher inflation, which already appears to be on the rise. […]The big question will be the extent to which the Fed heeds the warning lights flashing in the background.” – Chris Williamson, chief economist, Markit

The February jobs report was a ‘mixed bag’ and almost the mirror image of January. Employment was better than expected. The rest of the report was broadly positive, with the household survey revealing that employment increased by a “massive” 530,000 last month, for a cumulative three-month increase of 1.5m. The participation rate “rocketed”, hitting a 15-month high of 62.9%, up from 62.7%. The employment-to-population ratio jumped to 59.8% - its highest since April 2009.”Any remaining labour market slack is getting eaten up very quickly. A June rate hike is coming.” – Paul Ashworth, chief US economist, Capital Economics

"As the labor market dynamics are the most important driver of consumer spending, which in turn is the main growth engine for the US economy as a whole, today’s solid employment report is unequivocally in line with our view that the various headwinds on the Fed’s radar screen won’t derail the US recovery. Accordingly, we continue to think that financial markets underestimate the number of rate hikes this year – even as fed funds futures do now at least price one rate hike for September. In our view, we will be seeing two to three hikes (with three hikes being our baseline) this year, followed by more in 2017." - Dr.Harm Bandholz, chief US economist, UniCredit Research

"The rebound in hiring was driven by the service-providing sector, which added 245k jobs on the month. Continued job gains of 200k or more per month are more than enough to keep the unemployment rate trending lower. We no longer see any substantive slack in labor markets. [...] We continue to expect the FOMC to keep rates unchanged at its March meeting; however, consistent job growth and further improvement in other macroeconomic data could raise risks of a move as early as April. Our baseline forecast of rate hikes in June and December remains unchanged." - Jesse Hurwitz, Barclays